The strategic audit of Red Bull company.

Marketing planning and leadership

Red Bull company

Introduction

The strategic audit of Red Bull company.

Red Bull is an energy drink sold by Austrian company Red Bull GMBH, created in 1987. In terms of market share, Red Bull is the highest selling energy drink in the world, with 5.9 billion cans sold in 2013. Idea of creating such drink came to the Austrian entrepreneur Dietrich Mateschitz after trying thai energy drink Krating Daeng.

PESTEL analysis

· Political

o There is a strict government control in many countries about the contents of the drink, particularly about torine.

· Economical

o Recession of economic

o Heavy tax burden

o Unemployment rate

· Social

o Modern trends of using healthy products and excluding unhealthy

o Low rate of birth in many countries where company operates

· Technological

o High technology

· Environment

o Modern trends of protecting the environment

· Legal

o In order to operate in many countries they need to have a patent

Porter’ 5 forces

· Industry competitors and extent of rivalry : LOW

o Company has a huge customer base, despite the fact that many companies are imitating them.

o Due to the fact that the market of energy drinks are growing and has a good margin, many companies came there.

o Red Bull has a very strong and developed distribution channels, which is one of the main competitive advantage among other companies.

o Market of energy drinks demand a total concentration on the brand and permanent development of product, so there is a huge number of companies that attempted to enter this market.

o Last trend in this market is a pure natural sports drink and this type of products has big opportunity to take a part of market share of Red Bull.

o Another new product which came to market – caffeine energy drinks and it has a right to take some part of the market.

o The world market of energy drinks are very specific where brand awareness and familiarity is one of the key factors for success and this factors may be provided mainly by transnational companies.

· Threat of new entrants: MEDIUM

o Red Bull has a very solid position on this market and a big number of loyal customers, so even if they increase prices they would still got their customers.

o Main global competitor for Red Bull is Coca cola with their new product “Relentless”. It has bigger can and cheaper price.

o By the time market of energy drinks matured, Red Bull lost their advantage of first mover, but at the same time it still the biggest player on this market.

· Threat of substitutes: LOW

o A lot of small companies replicating Red Bull, has little difference in taste and low price.

o According to the strategy of Red Bull they are keeping prices high in order to associate their product with high quality.

o Because of customer loyalty and power of brand are high and strong, cross substitution is low. This is possible because purchasing usually occurs impulsively.

o There is a certain number of products, which can give an energy explosion, without using such ingredients as caffeine, sugar and taurine.

Also there is a plenty of good alternative to energy drinks, herbal teas for example. Main difference is that it they give longer effect of energy. Longer but less stronger.

· Bargaining power of buyers :LOW

o Market of energy drinks are very concentrated and the position of Red Bull are strong and this facts makes bargaining power of buyers very low

o Buyers of this level are not price sensitive, because they are high end of market and buy energy drinks as a necessity

o Also level of bargaining power depends from type of channels. Big retailers such as Wallmart have a huge customer base, so they have strong bargaining power on producer.

· Bargaining power of suppliers: LOW

o RedBull is a big partner company, which gives a huge orders to suppliers and this fact makes them heavily dependent upon RedBull.

o Also the fact that production process is simple, makes the power of supplier low.

SWOT analysis.

· Strength

o Product quality

o Modern innovative brand style

o Great brand awareness

· Weaknesses

o High price

o Poor communication

o Only several types of product in line

· Opportunities

o Market of energy drinks are very dynamic and perspective

o Customers are very interested to any new products on this market

o Market growth rate is 20% a year

· Threats

o Possible harm to physical condition of customers

o Possible legal restrictions by governments

o A lot of competitors existing and newly passing to the marke

Brand equity.

One of the main source of brand equity of Red Bull is brand awareness. Also status of the product gives a reason to buy it, and quality is high but on the same time consumer asses it anyway higher.

o Company attracts new stuff members to the company by supporting productive working conditions

o Also, due to quality training process company accept many stuff members without experience

· Skills

o Meeting the needs

o Sport marketing competency

Cultural web.

· Stories

o Red Bull is widely known as a highest selling energy drink in the world (5390 billion in the world by 2013)

o Idea of such drink came to Austrian businessman after trying Thai energy drink Krating Daeng 30 years ago.

o Red Bull company sent Felix Baumgartner to the space (to jump down)

o Red bull company spent 500 million $ each year on Formula 1.

· Rituals and routines

o As the price of Red Bull is higher than average price on other energy drinks, customers expect quality higher than average.

o Due to accents on marketing activities, customers perceive Red Bull as a part of bright life and active sports.

o Very often, company recruits student brand managers to promote their product among young student group.

· Symbols

o Company logo is two guars, fighting against each other in front of a yellow gold spot, represents power, aggressiveness, dynamic and risk-taking. Animals represent power. Silver and blue parts are the symbols of intellect. Yellow and red parts symbolize emotion.

o Animals on the logo are not bulls. They are guars.

o Official symbol of slogan of the company is “Red Bull gives you wings”

o Also company use mobile teams on company cars which visits city events in order to promote Red Bull drinks.

· Organizational structure

· Control systems

o One of strongest controlled processes is the media and content management and in order to effectively control it Red Bull created own media company – Red Bull Media House. It was opened in 2007 in order to operate a TV station, banner production, and run digital strategy at general.

o By the interview of employees, company has creative and inspiring work atmosphere.

o Also company has own policies of internal and external interaction.

· Power structures

o Owner of the company Dietrich Mateshitz, prefer to control company only by himself and the last of his decision is to quit from Formula 1 if his team would not have an access to competitive engine.

Task 1

According to the fact that market of energy drinks has a dynamic changes, company need to react to this changes in order to hold their position on global market. Due to fact that they have a lot of criticism in the western markets and a huge number of copycats (more than 200), they need to switch their attention from developed markets, like USA or Europe, to developing. While struggling with the problem on western market now, they risk to come late to the more free markets of such countries like Pakistan, Iran, India and etc.

Other concern (weakness) of the company is the fact that company has very limited, in fact small, number of products. Buzz marketing of the company directed only on the young generation, ignoring other age groups, which is also drinking Red Bull drinks time to time. So in order to fix current situation company need to diversify their product line and by this actions they potentially may satisfy all age groups. Separately i want to mark the fact that company already has a famous brand and this may reduce possible company future spends on marketing in case they will develop new products in their line and change their strategy. Next, according to current segmentation of Red Bull they segmented market to women, men and children.

Looking to their global marketing strategy we can set eyes to the fact that 70% of their activities are concentrated on the markets of USA and Europe and less portion of activities they pay on Asian, African and Middle East markets. Comparing the number of population of all this countries to population of US and Europe, we see that it’s larger by several times. Also, I want to mention fact that Red Bull has representative offices in the countries I mentioned above, but they have no more or less developed infrastructure. Generally, in all countries of third world, company product developed on middle level (sales & marketing), but anyway they need to move higher. In other case their positions will decline because of more active competitors. Another special characteristic of third world markets is the proportion of men & women, young & old and it’s another one point to correct the strategy. Next feature of the markets of third world countries is the level of income. It is traditionally low to the majority of population. That’s why low end level energy drinks are holding this markets.

Based on the above facts, I would recommend Red Bull to offer some cheap energy product in order to expand on the markets of third world. Regarding to this information and the fact that any future products to offer need to be adapted to each country on this markets, company need to create separate R&D department which would research characteristics of each markets. Important to keep in mind, that new segmentation suggests new strategy. So, according to all information, we can assume that Red Bull company basically ignoring huge markets, turning their potential customers to competitors.

Task 2

So, i want to offer different strategy in order to settle problems. Also, I want to offer marketing mix for new segmentation. Offered strategy include 3 types of segmentation and targeting:

· Old age

· Children

· Women

I think, I need a comment the point about children. Of course the product (drink) created for the children would be different and contain different ingredients, which would be soft to child organism. In case company will use this opportunity, they would earn huge profits in both parts of the global markets (western and eastern). Lets move further, to the 4’p :

Old age

Product:

Modern trends of the Eastern markets is that majority of the population are people elder than 50 year. They also need some shots of additional energy. I could even guess that drink should be herbal, because caffeine and taurine is not the product for old people.

Price:

The same price policy may be applied for this target group (different packages, for different price)

Place:

Concerning the place, it should places available to old people (big and small shops)

Promotion:

As we need to reach attention of the audience I propose to concentrate on newspapers and evening shows.

Children.

Product:

Any product oriented to children should not contain any caffeine or taurine parts. Basing only on existing brand awareness of Red Bull company may launch even milk based drink for children.

Price:

According to the fact that Eastern market are very price sensitive, company need to create different types of packages in order to minimize the price.

Place:

Location policy should be the same that company apply nowadays on developed markets. Product should be in famous retail chains and also in small location, like groceries, computer clubs and stations.

Promotion:

Promotion targeted to children should concentrate at all channels were the attention of children could be reached: